Settlement of Disputes with Foreign Investors

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One of the most significant issues, subject to consideration by different laws and regulations in the commercial and economic fields, is the settlement of disputes arising with a Foreign Investor within the Kingdom of Saudi Arabia.  The Saudi legal system is considered to be fairly balanced between the various interests involved in settling foreign investment disputes.

Article 13, paragraph (2) of the Saudi Investment Law deals with the most important aspects of those disputes arising between a Foreign Investor and his Saudi partners.  Article 13 expressly states without prejudice to the agreements of which KSA is a party, “the Disputes arising between the foreign investor and his Saudi partners in relation to its investments licensed in accordance with this Law shall, as far as possible, be settled amicably. Failing such settlement, the dispute shall be settled according to relevant Laws.”  

When a Foreign Investor violates the provisions of the Foreign Investment Law and the Implementing Regulations thereto, the Authority (SAGI) shall give notice to the Foreign Investor to rectify such violation within a period of time specified by the Authority. If no timely response is obtained and without prejudice to any harsher penalty, the Foreign Investor shall be subject to the following penalties if the violation persists: (a) withholding all or some of the incentives and benefits given to the Foreign Investor; (b) imposing a fine not exceeding SR 500,000; and/or (c) revoking the violator’s Foreign Investment license.

Article 13, paragraph (4), sets forth in the Foreign Investment Law the opportunity for the Foreign Investor to appeal to the Board of Grievances against the penalties imposed by SAGI.  Clearly, the Saudi Legislature has wisely established a fair, regulated, and controlled system balancing the various investment interests of the Foreign Investor and his Saudi partners. 

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